Daily Digest 6/4 - The Structure Of Collapse, The Story Of America's Opioid Addiction

Economy

Emergency measures become permanent policies. The status quo’s leaders expect the system to right itself once emergency measures stabilize a crisis. But broken systems cannot right themselves, and so the leadership is forced to make temporary emergency measures (such as lowering interest rates to zero) permanent policy. This increases the fragility of the system, as any attempt to end the emergency measures triggers a system-threatening crisis.

To put this in perspective, I'll compare it to the US subprime crisis...a crisis that was likewise triggered by the demographic deceleration of population growth. But still, despite decelerating in the US, there was (and still is some growth...see below). The Fed was determined to use (ok, abuse) interest rate cuts as a substitute for decelerating population growth among adults. The chart below outlines the decelerating 20-64yr/old annual population growth through 2025 (this includes all permanent residents...legal or otherwise).

When the flow of credit to the business community starts to slow down, it is inevitable that the overall economy slows down as well. It is just basic economics. So the deterioration of the U.S. economy that we have witnessed so far is just the beginning of a process that is going to take quite a while to play out.

And let us not forget that most of the rest of the world is already is much worse shape than we are. Most global financial markets are officially in bear market territory right now, and some nations are already experiencing full-blown economic depression.

This week, I’ve released a special video report on an incredible new tech phenomenon. This tech phenomenon is revolutionizing the world right now. Countries, companies and groups around the world are organizing themselves to implement this technology.

International Data Corporation, which is one of the leading research firms in the world, estimates that global spending on this technology is going to grow 17% a year.

Note that a 94 month cycle (7.83 years) points to all six major lows since late 1977 – see the green ovals. The cycle lows do not precisely match price lows, of course, but in 5 of the 6 cases they are close, and the sixth case is split between price lows in 1999 and 2001. The monthly RSI at the bottom also indicates all significant lows.

The common person may not understand all this, and the lessons from history. But the 'experts' most certainly should understand them, and quite frankly they do. They may not say so, they may never admit it, they may let themselves be convinced, and even convince themselves and quiet the nagging doubts, but at the end of the day they know exactly what they are doing, what they are abiding, what they are enabling if only by their silent acquiescence.

The funny thing is that the Obama administration says that the unemployment rate actually went down last month. Almost every month since Obama has been in the White House, large numbers of Americans that have been unemployed for a very long time are shifted from the “unemployment” category to the “not in the labor force” category. This has resulted in a steadily falling “unemployment rate” even though the percentage of the population that is actually working has not changed very much at all since the depths of the last recession.

The Bureau of Labor Statistics claims that the number of Americans “not in the labor force” increased by 664,000 from April to May. If you believe that, I have a giant bridge on the west coast that I would like to sell you. The labor force participation rate is now down to 62.6, and it is hovering just above a 38 year low.

There’s no question that opioids are effective at managing certain types of pain. But American medicine has become far too reliant on the potentially dangerous drugs for the wrong reasons. About 15 years ago, hospital watchdog groups grew concerned that physicians were not taking pain management seriously enough. The solution to this perceived epidemic of pain in the early 2000s was opioids. These strong painkillers became the drug of choice as ibuprofen (the active ingredient in Advil, Motrin, and similar products) had fallen out of favor thanks to overblown concerns about the risks of internal bleeding.

Gold & Silver

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As outlined in his 2014 book, The Next Economic Disaster: Why It’s Coming and How To Avoid It, he found that, throughout history, economic collapse has virtually always occurred when two things happen simultaneously: Private debt grows by more than 20 percent in a decade, and a nation’s private debt to GDP ratio exceeds 150 percent. In other words: When private debt gets to a certain level, it can topple whole economies—as it has here during the Great Depression and Great Recession. It was a fiscal smoking gun.

But the truly revolutionary part of Vague’s work came when he started advancing his cure to the private debt bubble he’d discovered: Widespread debt restructuring. In other words: Forgiving loans, as Croatia has now done for its poorest citizens. The proposal was radical, especially given Vague’s biography. After all, he’d made his fortune in banking as CEO of First USA Bank and then Juniper Capital. Now, here he was, telling members of his own class that they needed to forgive loans in order to serve the common good...

The issue in Philadelphia is similar to the issue at state and municipal pensions all across the country. They’re underfunded and not governed by ERISA [Employee Retirement Income Security Act], a 1974 law that governs the pensions of corporations. States and municipalities were excluded from that. It effectively means that states and cities can get away with a level of underfunding that corporations cannot. So across the country we have underfunded pensions [to let us use the money elsewhere]. At a certain level of underfunding, usually between 50 and 70 percent, there’s no level of performance from an investment return standpoint that can get you back up to where you need to be. That’s why we have case studies like Kentucky’s teacher retirement fund, which is only 27 percent funded...

We’re whistling past the graveyard. Underfunded pensions means that other things—particularly infrastructure and education—are slowly being starved in our states and cities. It is something of an irreversible national trend. Bridges don’t get repaired and class sizes get ever larger because of this insidious, incremental devolution, if you will. So, yeah, there will be wringing of hands, there will be lamentations, there will be promises to do things, but we’ll continue to starve these big needs if we don’t do something big [with pension debt].

Reading between the lines, he's saying this is too big for our political system anywhere in America to deal with until there is a collapse. So, the portion of the City budget that has to go to pensions will continue to rise which will continue to starve other parts of the budget. Infrastructure will continue to crumble, police and fire will get more and more underfunded, schools will be starved, the overall tax burden (already nearly the highest in the country for City residents) will go higher, etc.